The trust is designed to offer flexibility to investors who decide to waive all, or part, of an outstanding loan.
Loan trusts allow investors to make an interest-free loan which is repayable on demand, and the proceeds are placed in a single premium investment bond, written in trust for the chosen beneficiaries. Growth in the value of the loan falls outside an investor’s estate, and is therefore exempt from inheritance tax (IHT).
With an Enhanced Loan Trust, the trustees prompt a review of the lender’s circumstances as part of a regular process, to establish whether the lender wants to waive all, or part, of the loan to the beneficiaries.
According to Royal Skandia, by exploiting other IHT exemptions, such as utilising unused allowances and making further gifts of the loan to the beneficiaries trust, an Enhanced Loan Trust “could play a key part in significantly reducing the lender’s IHT liabilities”.
Royal Skandia has removed its annual fee of £300 plus VAT for all new trust applications that have premiums of £200,000 or more, and which are made before the end of 2011.
